U.S. CPI Data is Higher Than Expected as Market Turns Fearful

GB Market Commentary 10/02/2022

by Marcus Sotiriou

Bitcoin has dropped around 3% immediately after U.S. CPI data, which was released at 1.30pm today, came in at 7.5% for year-over-year inflation versus the expected 7.3%. This means that the odds of a 50-basis point rate hike in March (instead of the planned 25-basis point rate hike) has risen from 30% to 43%. Due to the increase in likelihood of a bigger rate hike, Bitcoin was sold off on the news, as risk-on assets tend to perform worse if the cost to borrow increases. This may mean that markets are fearful leading into the first rate hike on March 16th.

us-cpi-data-is-higher-than-expected-as-market-turns-fearful Meanwhile, many major financial institutions are announcing plans to integrate crypto into their services. Multiple insider sources confirm that BlackRock, who are the world’s largest asset manager, is preparing to offer a cryptocurrency trading service to their clients. BlackRock have over $10 trillion of assets under management – over 5 times the whole crypto market. Even if just 1% of these assets become allocated to crypto, that is a significant boost to the total value of the crypto market.

Furthermore, the largest independent digital advisor in the U.S., Betterment, will allow its 700,000 clients to invest in crypto. It is becoming progressively apparent that although a few years ago no one wanted to be first in entering the crypto space, now no one wants to be last. We are seeing a race going ahead where no one wants to be left behind.

In addition to financial services firms allowing clients to buy or sell crypto more easily, an increasing amount of technology firms are making crypto more accessible. Apple, the biggest company in the world by market cap with around 1 billion users, are introducing a new feature to let merchants accept payments in crypto with the new iPhone. This clearly shows that we are very much still in the early phases of this revolution, as the global crypto market only has around 300 million users worldwide currently.